In 2025, the S&P 500 traded around 6,835 and was up approximately 16% year to date (YTD). Market direction remained most sensitive to Federal Reserve expectations, inflation data and the earnings outlook, with returns also shaped by mega-cap tech leadership and the broader AI narrative. The index pulled back from earlier December highs, but it has so far held above key major moving averages (MA).

Key 2025 drivers included:

• ‍Fed expectations and inflation: Inflation cooled through the year but remained sticky around 2.5% to 3%. A Fed easing bias likely supported price to earnings (P/E) multiples and “risk-on” positioning. More recently, markets appeared increasingly rate-sensitive, with the decreased likelihood of an additional rate cut until March 2026.
• ‍Earnings and guidance: Corporate earnings remained strong quarter on quarter. Recent Q3 results reportedly saw over 80% of the S&P 500 beat earnings per share (EPS) expectations. For Q4, the estimated year-over-year earnings growth rate is 8.1%, despite ongoing concerns around import tariffs and potential margin pressure.
• ‍Index leadership and breadth: Returns were heavily influenced by mega-cap tech and AI beneficiaries, even as broader market breadth appeared less consistent at points through the year.
• ‍Policy headlines and volatility: Trade and tariff headlines drove sharp moves, particularly earlier in the year. Some investors pointed to the “TACO” trade, with rapid recoveries after policy proposals were softened. Over time, similar shocks appeared to have less impact as the market became somewhat desensitised.
• ‍Valuations and sensitivity: The forward 12-month P/E ratio for the S&P 500 is 22, above the 5-year average (20.0) and above the 10-year average (18.7). That gap kept valuation sensitivity, especially in AI-linked names, firmly in focus.

Current state

The S&P 500 is about 1% below record highs hit earlier in December. That could indicate the broader uptrend remains in place, with a move back toward the recent highs one possible scenario if momentum improves. Despite the recent retracement, the index remains above all key major moving averages (MA). The latest bounce followed lower than expected CPI numbers earlier this week, alongside continued, and to some, surprising optimism about what may come next.

What to watch in January

• ‍Q4 earnings from mid-January: Results and guidance may help clarify whether valuations are being supported by forward expectations.
• ‍AI narrative and positioning: With AI-linked mega-caps carrying a large share of market capitalisation, changes in sentiment or expectations could have an outsized impact on index performance.
• ‍US jobs and CPI data: The latest US jobs report reportedly points to the highest headline unemployment rate since 2021. Cooling inflation this week may keep markets alert to shifts in rate cut timing, particularly around the March decision.

S&P 500 daily chart

Major FX pairs

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AUD/USD

AUD/USD has been choppy in 2025. Since the “redemption day” drop in April, the move has looked more like a steady grind higher than a clean upside trend.

Key levels
Recent peaks in early September and mid-December highlight resistance near 0.6625. Support has been evident around 0.6425, where price bounced over the last month.

What is supporting the bounce
That support test coincided with stronger than expected jobs and inflation data, lifting expectations that the Reserve Bank of Australia (RBA) may raise rates during 2026 rather than cut again. The latest pullback looks contained so far, with buying interest already visible and price still above key longer-term moving averages.

What could drive a breakout
The pair remains range-bound, but the tilt is still constructive. If Chinese data stays firm, metals prices hold up, and the central bank outlook remains relatively hawkish, a break above resistance could gain more traction.

AUD/USD daily chart

EUR/USD

After early 2025 euro strength, EUR/USD has mostly consolidated since June in a roughly 270 pip range. This month tested 1.18 resistance, reaching highs not seen since September.

What price is doing now
The recent pullback still lacks strong downside conviction. Some technical analysts refer to the 1.17 area as a near-term reference level.

What could come next
If price holds 1.17 and buyers step back in, another push toward 1.18 is possible. One view is that the European Central Bank (ECB) could be less inclined to ease in 2026, which could be consistent with a firmer EUR/USD scenario. Broader analyst commentary also suggests the euro may stall rather than collapse against the US dollar, although outcomes remain data and policy dependent.

EUR/USD daily chart

USD/JPY

Year-to-date picture
USD/JPY is close to flat overall for the year. After US dollar weakness in Q1, the pair reversed higher and now sits just below resistance near 158.

Rates remain the main driver
Rate differentials still favour the US dollar. The Bank of Japan (BOJ) held steady for much of the period despite expectations it might act, and the recent rate increase was modest. Policy has only moved marginally away from zero.

What could shift the balance
Rate differentials remain a key influence. Without a clearer shift in BOJ policy, the JPY may find it difficult to sustain a rebound. Some market commentators cite 154.20 as a chart reference level.

USD/JPY daily chart

ดัชนีสหรัฐถอนตัวจากระดับสูงสุดเป็นประวัติการณ์หลังจากเฟดส่งสัญญาณว่าไม่มีการลดอัตราดอกเบี้ยในเดือนมกราคมNasdaq ได้รับผลกระทบมากที่สุดด้วย ภาคส่วน AI ฟื้นฟูความวิตกกังวล

รวมสิ่งนี้เข้ากับการเผยแพร่ข้อมูลงานที่ล่าช้าในสัปดาห์นี้ และคำถามกำลังเพิ่มขึ้นว่าตลาดสามารถรวบรวมกลุ่มซานตาคลอสในปีนี้ได้หรือไม่

ข้อมูลงานล่าช้าอาจกำหนดแรลลี่ซานต้า

• สัปดาห์นี้นำเสนอสิ่งสำคัญ ข้อมูลเศรษฐกิจ ที่เลื่อนออกไปในระหว่างการปิดเครื่องของรัฐบาล:
  
  • วันอังคาร: บัญชีเงินเดือนที่ไม่ใช่ฟาร์ม
  • วันพฤหัสบดี: ดัชนีราคาผู้บริโภค (CPI)
• การเปิดตัวทั้งสองนี้สามารถกำหนดได้ว่าตลาดสามารถเพิ่มขึ้นหรือเผชิญกับแรงกดดันเพิ่มเติมในวันคริสต์มาสหรือไม่
• คาดว่าจะมีความผันผวนรอบทั้งสองประกาศเนื่องจากเทรดเดอร์วางตำแหน่งที่น่าประหลาดใจ

ECB และธนาคารแห่งอังกฤษเข้าสู่การตัดสินใจอัตราดอกเบี้ย

• ธนาคารกลางยุโรปและธนาคารแห่งอังกฤษประกาศการตัดสินใจอัตราดอกเบี้ยในสัปดาห์นี้
• ผู้ค้า EUR และ GBP ควรเฝ้าระวังความแตกต่างของนโยบายใด ๆ ที่อาจสร้างความผันผวนของสกุลเงิน
• การไหลข้ามพรมแดนอาจเปลี่ยนแปลงเนื่องจากนักลงทุนชั่งน้ำหนักวิถีของธนาคารกลางที่แตกต่างกัน

ข้อมูล Flash PMI ให้ชีพจรทางเศรษฐกิจแบบเรียลไทม์ใน

• พรุ่งนี้มอบภาพรวมเศรษฐกิจทั่วโลกผ่านการเผยแพร่ PMI แบบแฟลชจากญี่ปุ่น ออสเตรเลีย ยุโรป สหราชอาณาจักร และสหรัฐอเมริกา
• ตลาดสามารถตอบสนองอย่างรวดเร็วต่อตัวชี้วัดที่มองในอนาคตเหล่านี้
• ความแตกต่างในภูมิภาคใดๆ อาจส่งสัญญาณการเปลี่ยนแปลงของโมเมนตัมทางเศรษฐกิจในตลาดหลัก

ข้อมูลเชิงลึกตลาด

ดูการวิเคราะห์ของ Mike Smith ในสัปดาห์ข้างหน้าในตลาด

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เหตุการณ์ทางเศรษฐกิจสำคัญ

ติดตามข่าวสารเกี่ยวกับเหตุการณ์ทางเศรษฐกิจที่สำคัญในสัปดาห์นี้

Markets have bounced back strongly this week. The S&P 500 is now just 1.5% from record highs, and the Nasdaq is recovering well following its pullback.

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Rate Cut Expectations

The main driver behind this rally was a shift in Federal Reserve rate cut expectations. Markets are currently pricing in a quarter-point rate cut for December, with only a 25% chance of another reduction in January. This week's economic data will be crucial in shaping expectations going into 2026.

Key Economic Data This Week

Several important data releases are scheduled for this week.  The PCE inflation data — the Fed's preferred inflation measure — for September will finally be released on Friday and could have the biggest impact on December and January rate decisions. The ADP jobs report and weekly jobless claims will also be released, while the non-farm payrolls report has been delayed again.

Global Manufacturing Snapshot

Today also kicks off a busy week of manufacturing data releases. Global PMI numbers are due across the board, including figures from the Eurozone, UK, Germany, and the US this evening. These reports will provide a critical snapshot of global economic health and could help reveal the impact of the US trade tariffs.

Gold Breaks Higher

Gold made a significant move on Friday, breaching the key $4,200 level after consolidating last week. The precious metal has followed through today, and the $4,400 level now looks achievable if buying pressure continues.

Bitcoin Under Pressure

Bitcoin has given up last week's modest gains and seen substantial selling pressure. A significant drop of about $4,000 occurred during Asian trading this morning — a notable decline for an Asia session. The key level to watch is $84,000, with potential support at $80,000 (the lowest level since March).

Market Insights

‍Watch Mike Smith's analysis of the week ahead in markets.

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Key Economic Events

‍Stay up to date with the key economic events for the week.

If you look at equity markets in particular, you'd think everything smelled of roses. For the 47th time this calendar year US indices have made record all-time highs and 46 times at record closing highs. Earning season is underway and so far, it is doing what it always does, which is beating the Street 75 percent of the time.

Banking, Tech and industrials are the standouts. And even when you look at the 493 non magnificent 7 stocks on the S&P 500 the gap between the seven and the rest is finally starting to close up. So all is well at least that's how it appears.

However over the next 20 days the risks that are facing global markets cannot be understated. First and foremost is the US presidential election. As we point out in our US 2024 election specials, the margin between Trump and Harris has never been closer.

In fact, most probability markets now have Trump ahead. Predictit for example, Trump leads by three points and on RealClearPolitics it's even larger sitting at 10.8 points. Most of the key states or swing states are statistical dead heat but on average Trump is now ahead by 0.2 at 47.7 to 47.5.

Whichever way you look at it, whoever wins on Election Day, it will lead to disputes and the other side is unlikely to accept the result. The political upheaval will filter through into markets, and we need to be ready for that. What has also been lost in geopolitics and the incredible run in equities is movements in the bond market and the risks around US inflation.

And it is this that we need to take a closer look at. Trends and Key Drivers in US Inflation Blink and you will have missed it, the back end of the USU curve is back above 4%. This is down to several risk factors, The US presidential election being one, employment being another, and then the big one inflation rearing its head in September.

There was an unexpectedly strong rise in CPI inflation for September. So is there some going on here or is it just a false flag? First things first - Core PCE inflation continues to trend at a consistent pace of approximately 2 per cent on an annualised basis.

This suggests that inflationary pressures, while present in some sectors, remain largely in check but risks remain. So what are the keys here? Key Factors on the Inflation Outlook: 1.

Core CPI Outperformance and PCE Expectations: September's core CPI surprised with a 0.31per cent month-on-month (MoM) increase, surpassing consensus forecast of 0.25 per cent. While this unexpected rise is noteworthy, the details of the PPI (Producer Price Index) data suggest a more moderate increase in core PCE inflation, estimated at 0.21per cent MoM for the same period. The issues in the inflation figures however remain in components such as shelter and insurance, which had been driving much of the previous increases, with weather events and housing price volatility expect inflation fluctuations here to persist in the near term.

The upward surprises in the headline CPI data were concentrated in volatile categories like apparel and airfares. Airfares, for instance, rose by approximately 3 per cent MoM on a seasonally adjusted basis. 2. Wage Growth and Labor Market Dynamics: The Atlanta Fed’s wage tracker indicated that wages picked up in September, with the unsmoothed year-on-year (YoY) measure reaching 4.9 per cent, up from 4.7 per cent in August.

Additionally, the 3-month smoothed measure and the overall weighted average both rose to 4.7 per cent, compared to 4.6 per cent in the previous month. Whichever measure you want to use, real wages in the US are growing at about 2.5 per cent. While this wage growth exceeds the rate typically consistent with a 2 percent inflation target (in the absence of significant productivity gains), it remains only modestly stronger and isn't a concern, yet.

It’s worth noting that wage growth may take longer to cool off, particularly given seasonal patterns in early 2024 and the effects of recent labour strikes in sectors like port operations and aircraft manufacturing, both of which have underscored the potential for more persistent wage inflation. Interestingly, the Atlanta Fed wage data revealed a sharp deceleration in wage growth for job switchers compared to job stayers. Normally, job switchers see higher wage increases, but over the past few months, the growth rates for both groups have converged.

This shift may signal weaker demand for labour and could be a key indicator of wage trends in the coming months. However, wages for current employees may lag behind, requiring time to adjust downward, much like how rental prices for new leases often move ahead of existing rents in shelter inflation. This dynamic suggests that wage pressures might remain elevated for a time, particularly if companies raise wages for existing employees to catch up with the now-slowing wage increases for new hires.

The ongoing wage growth for current employees could also keep hiring demand subdued, as firms may focus on managing costs rather than expanding their workforce only time will tell here. 3. Potential Impact of Hurricanes Helene and Milton: The inflationary impact from Hurricanes Helene and Milton are yet to be factored into most forecasts and thus it is important to acknowledge the potential for volatility in certain inflation components. Historically, hurricanes have primarily affected gas prices by disrupting supply chains.

However, there has been only minimal upward pressure on retail gas prices so far. Demand led cost in infrastructure and construction supplies also tend to increase post hurricanes as the clean-up and rebuild takes precedence. Another major CPI component that has historically shown sensitivity to hurricane-related disruptions is "lodging away from home." For example, in the aftermath of Hurricane Katrina in 2005, lodging prices initially dropped before rebounding the following month.

It remains unclear whether the recent hurricanes will affect hotel or recreational service prices in Florida, which were among the areas impacted. September CPI already showed weaker-than-expected data for lodging, and with discretionary spending on services potentially declining, this component could face further downside risks. However, if there is an unusually sharp drop in lodging prices for October, any hurricane-related distortions might result in a bounce-back in November CPI.

This is why we think the market needs to remain cautious on core PCE inflation. Will it stay modestly higher than the Fed’s 2% target over the near term? It's clearly possible.

Then there is the ongoing volatility in certain sectors and potential risks from external shocks like hurricanes mean inflation forecasts could still see adjustments. All in all we remain vigilant that despite the enthusiasm and bullishness in indices risks are building and traders need to be vigilant.

As we sit here and review the last weeks of 2024, it has dawned on us that 2024 was the year of wanting everything and getting nothing. Now that might sound like a ridiculous statement considering equities across the MSCI world are averaging double digit returns for 2024. In fact in the US they are on track for two consecutive years of 20% gains or more.

So we certainly gained something, but what we have come to realise is that 2024 was a year of anticipation and more anticipation and more anticipation but nothing being delivered particularly here in Australia. So let us put forward our reasoning. 1. RBA Rates – Pricing v the reality At the start of 2024 it's hard to believe that three rate cuts were fully priced into the cash right by December this year.

The pricing versus the reality facing the RBA in 2024 was one reason that we have probably seen muted movements in currencies and bond markets. We do need to commend the Reserve Bank of Australia (RBA) for navigating what has been a perplexing year in 2024. As mentioned, we start the year influenced by global central banks for multiple rates, driven in particular by the U.S.

Federal Reserve. However, by mid-year, pricing shifted so dramatically it moved through 189 basis points to be factoring in not one but up to four rate increases as inflation remained in a state of suspension as sticky components slow the rate of change and has seen underlying inflation holding at 3.5% and above. Despite this the RBA held rates steady throughout the year and has now adopted a dovish tone at its December meeting.

This is key – its 2024 cautious approach is seeing a 2025 pivotal shift and the board is now making it clear that its focus of managing inflation risks is starting to switch to addressing growth concerns. Market forecasting has easing beginning at the April meeting, the range from economists is February through to May 2025. Whenever it starts, the consensus between the market and the theoretical world is the same – one cut will bring several and come December 2025 the belief is the cash rate will be as low as 3.6%. 2.

Labour Market The other factor that has kept the RBA on the sidelines has been employment. IF we were to look at employment in isolation it should be championed. Underemployment, underutilisation and unemployment as a whole is – strong.

It has completely defied expectations in 2024, with employment levels reaching record highs and participation levels for the population and women in particular also at records. It should be noted that part of the reasoning for this is robust immigration, cautious corporate behaviour toward redundancies and then the big one public sector hiring. Surges in hires for education, healthcare, and hospitality, drove public sector resilience, offsetting weakness in private sectors like manufacturing, mining, and financial services.

What could force a change here is the 2025 Federal election – a minority government or even a change of government could lead to fiscal restraint and dampen employment growth, while a surprising downturn in job data could prompt the RBA to expedite rate cuts and increase the amount of cuts as well. Something traders will need to have their fingers on. 3. Record level Wage Growth Wage growth, a key concern earlier in the tightening cycle, moderated in 2024, easing pressure on policymakers both on the fiscal and monetary side.

At one point their wages were growing at levels not seen since record began. However, it did coincide with an inflation level of a similar rate meaning real wages were flat. Looking into 2025, wages remain a concern for rate watches for the following reasons: Minimum wage has consistently followed the inflation rate with a premium suggesting the will increase exceeding 3.5%.

Industrial relations reforms over the past 2 years have embedded wage rigidity. Finally accelerating wage increases in Enterprise Bargaining Agreements are now averaging 4%. Without corresponding productivity gains, these dynamics could challenge the RBA’s assumptions, complicating the path to rate cuts. 4.

Gravity defying markets Earnings multiples of the ASX 200 and its sector have soared in 2024. It’s a reflection of the optimism bordering on exuberance about peak interest rates and an imminent easing cycle. The forward P/E ratio of 17.9x is well above the 10-year average of 16.0x and significantly above its historical average of 14.2x.

Looking into 2025 – yes, these multiples are stretched, but when put into a global context it is understandable and even defendable. For example - Australian equities trade at a 21% discount to the S&P 500’s multiples and expectation for the US market in 2025 is one of further expansion. Thus to sustain these levels robust earnings growth are needed to close the P/E gap.

A 17.0x multiple down from 17.9, would meet expectations. 5. Banks being banks? One area that we note has not just defied expectations but also logic is Australian banks.

The banking sector was the standout performer in 2024. The sector outpaced the broader market by 25%, not hard when you look at CBA which has surged 40% in the past 12 months. It’s even more remarkable when you compare it to the material sector, it has outperformed its cycle peer by 50.2%.

The surge in passive investment flows (exchange traded funds and the like) which is growing at record levels, alongside superannuation sector contributions, fuelled this robust performance considering the Big 4 and Macquarie sit inside the top 20 and make up 45% of the ASX 20. However, this dominance is likely to face challenges in 2025. Key factors to watch include China’s commodity and economic outlook, shifts in risk asset performance, and potential regulatory scrutiny of superannuation’s ties to bank equity.

Coupled with stretched bordering in snapping valuations – the risks underscore the sector’s sensitivity to macroeconomic and policy developments going forward and overdone investment. 6. Iron Ore – heavy lifting Iron ore defied the forecasts in 2024. The expected collapse never truly eventuated, buoyed by cost-curve dynamics and stronger-than-expected demand in the latter half of the year.

Prices exceeded consensus estimates by upward of US$20 a tonne and provided a tailwind for materials. But, and it is a major but, China remains a pivotal factor. Broad-based policy stimulus announcements in late 2024 lifted sentiment, but execution and clarity remain uncertain.

China is looking to stimulate itself in 2025 and that will determine whether materials can close the performance gap with commodity prices in 2025. The other big unknown for Iron Ore – Trump 2.0 and his future tariffs on Australia’s largest trading partner. Signing off 2024 was a year defined by shifting dynamics across monetary policy, sector performance, and macroeconomic trends.

As we move into 2025, investors and traders will face a complex landscape shaped by earnings growth challenges, election-related uncertainties, and potential shifts in global economic momentum and policy. Successfully navigating these factors will come from understanding the macroeconomic signals and sector-specific opportunities they will present.

We know that this is slightly contrary to the consensus views but we think it needs to be said. The communication from the RBA (Reserve Bank of Australia) is unusually unclear, confusing and conflicted. The view conveyed in statement, press conference and minutes currently we would argue counter each other.

And the reason for this we believe is because the RBA is a reluctant hawk and is frightened to act. Let us now present why we think this and what it will mean for FX and yields in particular. The RBA has just completed a mass review of its operations and one of the key changes was to improve transparency.

This included press conferences, extended meetings, and more public discussions from members. The catch with this has been the mixed communications. Take for example the statement which was extremely ambiguous.

It was filled with terms like uncertainty, mixed signals, and complexity. It explains why the statement has this line: ‘the path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.’ That’s fair – things are complex and we understand why the board is waiting for more data. That was countered with this: ‘ The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.’ Historically, whenever the Board has included such a resolute statement in its communications, they followed up with a cut or a hike in the preceding meetings – the frightened hawk is there and strongly suggests that a rate hike is likely.

The initial AUD reaction to the statement we think shows why the communication is mixed. Then take the press conference – Governor Bullock’s were much stronger than the statement, indicating a significant stance, not really clear in the statement. As mentioned, the Board stated they are not ruling anything in or out, but in reality, they have dismissed the possibility of rate cuts.

That was confirmed when Bullock was asked on this exact point and confirmed that rate hikes were the only things discussed. There was no ongoing discussion about cuts in the near or medium term as they do not expect inflation to reach their target by mid-2026. The Board’s concern is that inflation is notably higher than expected, employment is solid and that overall demand is still generating inflation.

The reaction to all this was clear here: The next notable reaction was the interbank market. All though it doesn’t appear like much in this chart. Please understand this change is actually from a ‘cut’ to ‘hike’ so yes there is a 10% chance of a hike, that is from a 10% chance of a cut.

July will be crucial with substantial data releases, including the second quarter CPI (July 31), GDP figures, and the wage price index. Current forecasts suggest that inflation and employment are performing better than expected, raising concerns about the need for a potential harder landing in the economy to return inflation back to target. The focus is now shifting towards slowing down the economy further despite the per capita recession because in the RBA’s view the impact on the household’s price power in the future from high inflation is still too high.

Future Rate Decisions All things being equal – with the RBA turning itself in knots and trying so hard to stay the course the RBA's commentary suggests it still has preference to hold rates if possible. The big issue as it acknowledges is the possible need for near term tightening due to a lack of progress towards inflation targets. Here is the market’s forecast for rates post the meeting on Tuesday Which probably explains the AUD/USD reactions in the following 24 hours It flatlined – thus the market is telling us that it needs a catalyst, and those catalysts are clearly coming in July.

So to finish what’s the key? A significant upside surprise in the RBA's core inflation measure could lead to a rate hike, despite slowing demand and labour market conditions. We get the monthly inflation data next week, this will be the first strike then the July 31 quarterly read.

This will be huge and will be the biggest AUD mover outside of an RBA meeting. We will be providing as much information on this release the closer we get to the release. However as shown the RBA is a terrified hawk and without this inflation beat, the risk of further tightening diminishes, with expectations for the RBA to remain on hold until potentially the first rate cut in February 2025.

The next RBA meeting on August 6 it’s going to be an interesting 6 weeks for AUD traders ahead of what is a likely live event.